Next fight: card swipe fees?

A seemingly innocuous amendment to the credit card bill before Congress, offered last week by Senate Majority Whip Dick Durbin, reignited a long-simmering fight over fees between credit card issuers and the retailers who accept them for payment.

The two sides have been locked in this vicious battle for years, but largely below the radar. Now, retailers believe their chances for victory have soared since the financial industry they’re fighting has taken a reputational pounding, and the credit card industry itself has been subjected to punishing body blows from the president.

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“The chances are greater this year than they have ever been,” said Doug Kantor, counsel to the Merchants Payments Coalition, a group of retailers lobbying for congressional intervention on so-called interchange fees.

Lawmakers are not only more aware of the issue after years of outreach by retailers; the financial meltdown has also made many lawmakers more skeptical of arguments from the banking community, Kantor said.

The credit card bill’s easy glide to victory in the Senate on Tuesday by a 90-5 vote is strong evidence of the financial industry’s hobbled influence on Capitol Hill. President Barack Obama — who recently lambasted the credit card industry and its “anything-goes approach” — is expected to sign the bill into law by the end of the month.

Merchants pushing Congress to crack down on interchange fees hope they can harness that anger against credit card companies’ treatment of consumers to further their own cause.

“There’s now a recognition that maybe we need to rethink some aspects of our credit system, because there’s obviously been some major problems,” Kantor said.

But the banks and credit unions that offer credit cards contend that retailers really just want a legitimate business-to-business cost passed on to consumers and are trying to get Congress to hand them a “sweetheart” deal to do so.

Every time a shopper swipes a credit card at a store, the merchant pays various fees for processing the transaction, fraud protection and other expenses related to the credit card business. These “interchange fees” — money collected by the card issuer — make up the bulk of the fees.

Durbin’s amendment — which was designed to ensure that retailers could offer discounts when shoppers use debit cards instead of credit cards — didn’t make it into the final credit card bill now being negotiated on the Hill. But it raised the issue of credit card fees and sparked a flurry of lobbying, and the issue now lives on in other forms, in other bills. In fact, the amendment was more like the tip of the iceberg.

Merchants are pushing for far more sweeping legislation from Congress, complaining that card issuers have aggressively and unfairly raised interchange fees on them over the years, collecting a total of $48 billion in 2008 alone.